HOW WILL THE Energy Bill Relief Scheme WORK?

In order to prevent fears of thousands of small businesses going under, the government caps electricity bills at 21.1p per KWh and gas bills at 7.5p per KWh - less than half the expected cost this winter.

As part of an Energy Bill Relief Scheme, Jacob Rees-Mogg is promising to slash businesses' energy bills by half.

To allay fears that thousands of small businesses could go bust without state assistance, the Government will cap electric and gas bills at 21.1p and 7.5p, respectively.

In order to make up the difference, the Government will pay providers.

Only wholesale costs are covered by the Energy Bill Relief Scheme. Additional charges are paid by businesses, but they are relatively small.

Earlier this month, the Government capped household energy bills at £2,500 for two years. Gas and electricity prices were capped at 10.3p/kWh and 34p/kWh, respectively.

Small businesses will renew their fixed-term contracts in October - when the measures will go into effect - and will stay in place for six months.

The Energy Bill Relief Scheme will also apply to schools, charities, hospitals, and other non-domestic organisations.

Government officials said it would provide equivalent support to non-domestic consumers who use heating oil or alternative fuels instead of gas in Northern Ireland.

However, energy suppliers fear they will not be able to deliver the Government's support to business customers until November. Therefore, bills under the Energy Bill Relief Scheme will have to be backdated to October 1.

The contracts that businesses have with their energy suppliers can vary greatly based on their industry.

Businesses on fixed-term deals have to renegotiate their agreements in time for October 1: traditionally a key contract anniversary.

Prime Minister Liz Truss said: “I understand the huge pressure businesses are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods. As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.”

The Energy Bill Relief Scheme could cost up to £40 billion, according to Investec analyst Martin Young.